More Stories

Informist, Tuesday, Dec. 23, 2025

 

By J. Navya Sruthi and Vaishali Tyagi

 

MUMBAI – Power Finance Corp. Ltd. on Tuesday scrapped two bond issuances, citing higher coupon rates, market participants said. This is for the third time in a month that the company has withdrawn its bonds.

 

The power financier had on Nov. 25 scrapped the reissuance of Apr. 13, 2029, bonds worth INR 30 billion. Again on Dec. 9, the state-owned company withdrew the issuance of bonds, worth INR 35 billion, maturing on Dec. 11, 2040. 

 

On Tuesday, the state-owned company planned to raise INR 60 billion from two bonds. But it scrapped issuances of both the bonds maturing on Dec. 27, 2027 and Dec. 26, 2030 due to higher coupon rates, dealers said. PFC refused to respond to a call from Informist seeking a comment on the matter.    

 

According to the bid books accessed by Informist, the company received 76 bids, totalling INR 60 billion, with coupons ranging from 6.74% to 7.08% for two-year bonds, and 38 bids totalling INR 41.70 billion, with coupons ranging from 6.97% to 7.25% for five-year bonds.

 

The full amount of INR 30 billion for bonds maturing on Dec. 27, 2027, was bid at a coupon of 6.93%, according to the bid book. For the bonds maturing on Dec. 26, 2030, the full amount of INR 30 billion was bid at 7.07%. 

 

Despite a 25-basis-point rate cut by the Reserve Bank of India on Dec. 5, yields on corporate bonds continued to rise in the secondary market, with the market viewing the December rate cut as the last for this cycle. As of Monday, the weighted average yield on PFC's five-year paper maturing on Jan. 15, 2030, was 7.08%, up 31 basis points from 6.77% on Dec. 5. Similarly, the weighted average yield on PFC's Feb. 20, 2027, bonds was 6.80% Monday, up 26 bps from 6.54% on Dec. 5. 

 

TREND WITH PSUs

In addition to Power Finance Corp., National Bank for Agriculture and Rural Development, Small Industries Development Bank of India, and Indian Railway Finance Corp. have also withdrawn their issuances since Nov. 25. The cumulative total of withdrawals since Nov. 25 is INR 325 billion. 

 

Dealers and fund managers said the "incremental capacity" for a February rate cut has reduced. They said it is unlikely that yields will fall as had happened in April, the first rate cut in 2025-26 (Apr-Mar), along with measures to increase durable liquidity in the banking system.

 

Yields on the three-year, five-year, and 10-year NABARD papers, seen as benchmark for corporate bonds, fell by 10-18 basis points after the rate cut in April. Moreover, liquidity in the banking system has been in deficit for at least a week, which is also contributing to the rise in rates. Mutual funds have been selling corporate bonds since last week due to redemption pressure from banks to pay advance tax and goods and services tax.

 

Dealers estimate the outflow on account of advance tax and GST payments at around INR 3 trillion. The RBI's net injection into the banking system – a proxy for the liquidity deficit – was INR 548.52 billion on Monday, slightly lower than INR 577.21 billion on Sunday. 

 

CHEAPER BANK LOANS

The recent trend of state-owned companies withdrawing bond issuances is also due to lower bank loan rates relative market rates, according to dealers and fund managers. Bank borrowing is a lot cheaper than the high rates seen during the bidding, they said.

 

"If they (state-owned companies) find NCD (non-convertible debentures) not worthwhile, they will use bank lines until levels lower," said Killol Pandya, head of fixed income at JM Financial. "No shortage of bank lines for such enterprises," he said. In its December bulletin, the Reserve Bank of India said that the weighted average lending rate of scheduled commercial banks declined by 69 bps during February and October.

 

In the September quarter, PFC reported a net profit of INR 44.62 billion on revenues of INR 147.56 billion. Tuesday, PFC's shares ended 3.4% higher at INR 354.90 on the National Stock Exchange.  End

 

End

 

Edited by Vandana Hingorani 

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.